Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-2966-MA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO MALAYSIA FOR A ROMP IN - ENDAU AREA DEVELOPMENT PROJECT February 26, 1981 Programs Department East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in ithe performance of their official duties. Its contents may not otherwise be disclosed without World Elank authorization. CURRENCY EQUIVALENT US$1.00 = 1i$2.15 M$1.00 = US$0.46 M$l million US$465,000 WEIGHTS AND MEASURES 1 hectare (ha) 2.47 acres l kilometer (km) - 0.62 mile 1 meter (m) - 3.28 feet 1 square meter (sq m) 10.76 square feet 1 cubic meter (cu m) 35.31 cubic feet = 1.308 cubic yards 1 kilogram (kg) 2.2 pounds ABBREVIATIONS ADB - Asian Development Bank BPM - Bank Pertanian Malaysia - National Agricultural Bank CCL - Critical Consumption Level DARA - Pahang Tenggara Development Authority DID - Drainage and Irrigation Department DOA - Department of Agriculture DOF - Department of Fisheries DOVS - Departmnent of Veterinary Services FELCRA- Federal Land Consolidation and Rehabilitation Authority FELDA - Federal Land Development Authority FOA - Farmers' Organization Authority LPN - Lembaga Padi dan Beras Negara - National Padi and Rice Authority MARDI - Malaysia Agricultural Research and Development Institute MOA - Ministry of Agriculture O&M - Operation and Maintenance PWD - Public Works Department SMEC - Snowy Mountains Engineering Corporation T&V - Training and Visit Extension System UNDP - United Nations Development Programme GOVERNMENT OF MALAYSIA FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY MALAYSIA ROMPIN-ENDAU AREA DEVELOPMENT PROJECT Loan and Project Summary Borrower: Government of Malaysia Amount: US$40.0 million Terms: 17 years with 4 years grace at 9.6% per annum. Project Description: The proposed project provides for construction of irrigation works and development of new land for double cropping of rice on about 11,400 ha in four subprojects along the Rompin, Pontin, Anak Endau and Endau rivers in southeastern Pahang State on the east coast of Peninsular Malaysia and for housing and social facili- ties for about 4,750 settler families. The proposed project would focus on the smallholder rice farmers, who experience a high incidence of poverty in Malaysia. It addresses the two main factors responsible for their poverty, the small size of holdings and the low productivity of rice land. All of the direct benefits from the project would accrue to the settler families, about 24,000 people, whose present income is about US$125 per capita, well below the 1981 absolute poverty level income of US$320 per capita. At full project development in 1992 the per capita income of project beneficiaries is expected to be about US$700 or slightly less than the estimated US$790 critical consumption level in that year. There are no unusual risks associated with the project. This document has a restricted distribution and may be used by recipients only in the lperformance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - Estimated Cost: The table below summarizes the total cost of the project: Local Foreign Total …---- (US$ million) ---- Civil works 48.2 29.3 77.5 Service buildings and staff quarters 2.7 0.8 3.5 Equipment, vehicles & supplies 1.0 5.7 6.7 Land acquisition 0.5 - 0.5 Consultant services 1.8 4.2 6.0 Administration & engineering 2.7 0.3 3.0 Subtotal: Base Cost 56.9 40.3 97.2 Physical contingencies 7.8 5.9 13.7 Price contingencies 17.3 12.8 30.1 Total project cost /1 82.0 59.0 141.0 Financing Plan: Bank - 40.0 40.0 Government 82.0 - 82.0 Co-financing being sought - 19.0 19.0 Total 82.0 59.0 141.0 Estimated Disbursement: Bank FY 1982 1983 1984 1985 1986 1987 1988 Annual 3.0 7.0 8.0 8.0 7.5 3.5 3.0 Cumulative 3.0 10.0 18.0 26.0 33.5 37.0 40.0 Rate of Return: 17% Staff Appraisal Report: No. 3160-MA, dated February 19, 1981. /1 Exempt from all known duties and taxes. REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO MALAYSIA FOR A ROMPTN-ENDAU AREA DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed loan to Malaysia for the equivalent of US$40.0 million for a Rompin-Endau Area Development Project. The loan would have a term of 17 years, including 4 years grace, with interest of 9.6% p.a. PART I - THE ECONOMY /1 2. The latest economic report, "Malaysia: New Perspectives on the Third Malaysia Plan" (No. 1594-MA), is dated October 14, 1977. Since that report was circulated, a book has been prepared at the request of the Government, which reviews the overall performance of the Malaysian economy since 1960, discusses current issues and assesses future prospects. Entitled "Malaysia: Growth and Equity in a Multiracial Society," the book was published in July 1980. Detailed data on Malaysia's economy are shown in Annex I. 3. By most economic indicators, Malaysia has done well in the past. The per capita income of US$1,320 in 1979 is among the highest in Southeast Asia. During the past two decades, the Malaysian economy achieved an average real growth of GNP of about 7% a year. This sustained high growth rate is basicallv a reflection of the country's wealth in natural resources, especially its ample reserves of cultivable land; an outward-oriented growth strategy; good, albeit cautious, economic and financial management; and, not least, stable social and political institutions. Three specific factors were important: sharp rises in productivity in the rubber sector - rises which cushioned the effects of steep price declines and helped maintain the Malaysian share in the world rubber market; a big push for export diversification through rapid expansion of the production of palm oil and the extraction of timber; and rapid manufacturing growth, which has averaged about 13% a year since 1968 and has been increasingly oriented toward exports. 4. A look beyond the macroeconomic aggregates reveals that Malaysia has been trying to overcome a serious poverty problem. Since 1960, signi- ficant improvements have been made in raising production in agriculture, diversifying output and improving social services. However, the impact of these improvements on the incomes of the poor has been offset to a /1 Part I is essentially the same as the corresponding section of the President's Report No. P-2705-MA, dated August 7, 1980, on the Kelantan Land Schemes Rehabilitation Project (Ln. 1899-M1A), which was approved on August 26, 1980. - 2 - significant extent by other factors. Continuing rapid population growth has substantially reduced the impact of production increases on per capita incomes. In addition, Malaysia suffered a serious and sustained terms of trade loss during the 1960s which further reduced average real income growth during the period. As a result, a serious poverty problem persists: the Government estimates that almost 40% of the population have incomes insufficient to provide minimum requirements of food, shelter, clothing and other basic needs. Further, this problem is complicated by considerable racial inequalities in income and employment. Malay income on average is only about 40% the income of Chinese and about two thirds the income of Indians. Malays still predominate in employment in agriculture and non-Malays in the industry and services sectors. 5. Because the problems of poverty and racial inequalities are both serious and persistent, the Government has given top priority to solving them. Thus, the twin objectives of the New Economic Policy, introduced by the Government in 1971, are to eradicate poverty and to reduce the racial imbalance in income, employment, and the ownership of assets. More specifically, it is targeted that by 1990 the incidence of poverty will be reduced by two-thirds, that the pattern of employment will reflect the racial composition of the population, and that the share of bumiputras /1 in the ownership of the corporate sector will increase from 2% in 1970 to at least 30%. The New Economic Policy emphasizes the need for rapid growth in the industrial and services sectors as the principal means by which these objectives will be attained. The Governrment's long-term plan is based on the requirement that about 2 million, or almost 90%, of the new jobs to be created during 1975-90 would be in industry and services. This requirement implies a substantial reduction in the share of agricultural employment. It also implies a net shift out of agriculture of more than a million jobs from the number that would be employed if present employment patterns were to persist. 6. If the targets of the New Economic Policy are to be reached, the economy must maintain a long-term GNP growth rate of at least 8% a year. The growth of the manufacturing sector will have to be even more rapid. A more moderate growth rate would substantially reduce the creation of new employment in the modern sector and make it more difficult to achieve the targets for restructuring employment and reducing poverty. 7. Malaysia-s strong natural resource base together with a favorable outlook for the prices of her major commodity exports should provide the economy with sufficient financial resources to achieve rapid growth. Aside /1 Bumiputra literally means "son of the soil." The word is used to refer to Malays and other indigenous groups. -3- from short term fluctuations, the balance of payments current account should continue in surplus for the foreseeable future enabling an adequate level of reserves to be maintained together with a moderate level of debt service. The elasticity of tax revenues should also enable the Government to finance an expanded development program. Thus the availability of resources, which has not been a serious problem in the past, is expected to be even less of a constraint in the future. Compared with most other developing countries, Malaysia is fortunate in this respect. 8. Although Malaysia appears to have the financial capacity to achieve rapid growth, the economy will no longer be able to rely so heavily on rapid growth of primary production. While Malaysia is rich in naturial resources, which will provide a reliable base for the expansion of the economy, the growth rates of the production of such commodities as rubber, palm oil, petroleum and forest products are all likely to be lower than in the past. With growth decelerating in the resource sectors, rapid industrial growth will increasingly become essential to successful economic performance. This imperative arises not only from the viewpoint of production and the creation of real incomes but also from the viewpoint of employment and its racial restructuring. 9. In addition to rapid industrial growth, successful achievement of the targets of the New Economic Policy will require a concerted effort to accelerate the pace of rural development. Most of the poor live in rural areas. Although rapid growth of industrial employment can ease the problem of rural poverty by absorbing migrants from rural areas, poverty will continue to be a largely rural phenomenon. The projections of the Third Malaysia Plan indicate that,even if there is rapid sustained growth of employment in industry and services, more than three-quarters of Malaysia-s poor will be in rural areas in 1990. An expansion of income and employment opportunities for rural Malaysians is of high priority. Furthermore, the expected decline in the growth rates of the production of rubber and palm oil makes expansion of government programs to alleviate poverty even more necessary. These programs include accelerating land development, expanding replanting oi- rubber smallholdings, expanding extension and credit for rice farmers, promoting intercropping by coconut smallholders and improving the access of poor families to basic services. The greater availability of publiLc resources will enable the Government to undertake that expansion. But the main constraint to mounting a more effective attack on rural poverty appears to be the capacity of the public sector to identify and prepare projects that can affect large numbers of rural poor. 10. The Government does not have the direct control over private investment that it has over public investment, but it can play a strong role in providing a policy framework conducive to vigorous growth in the private - 4 - sector. Because the more obvious areas of import substitution have been exhausted, sustained rapid growth in manufacturing will have to rely increasingly on export expansion. Policies will therefore have to ensure a favorable export environment. With regard to institutional factors, the Government has already acted to alleviate fears in the private community about the Industrial Coordination Act and the Petroleum Development Act. The Government has also stressed that it will implement the Industrial Coordination Act in a flexible and pragmatic manner so as to encourage investment and growth. Because much of the concern in the private sector has been over how that Act will be implemented, flexible implementation by the Government should help to ease the concern in the business community. 11. In summary, the prospects appear to be good for achieving rapid growth and for ameliorating the twin problems of poverty and racial im- balances. Certainly there should be no serious constraints imposed by the availability of resources. To achieve the targets of the New Economic Policy will nevertheless require vigorous action by the Government along a number of fronts. The policy framework will have to be readjusted to ensure sustained growth of the industrial sector. A pragmatic attitude will be needed in interpreting and implementing the quantitative restructuring targets to ensure that sight is not lost of the overall goal of improving the racial balance. Growth in the supply of technically trained manpower will require close scrutiny to ensure that it does not constrain the restructuring potential made possible by rapid economic growth. Finally, larger and more effective programs to reduce poverty by direct action will require a concerted effort to expand the capacity of the public sector to prepare and implement such programs. 12. Assuming a continuing 7-8% rate of economic growth during the 1980s, Malaysia's balance of payments is projected to remain in modest surplus. The cumulative current account surplus is projected to average about 1.0% of GDP during the 1980s. Net direct investment medium- and long-term loans equivalent to about 4.0% of GDP would be required to maintain a reasonable level of reserves and to offset short-term and other outflows. At present about 15% of public debt outstanding and disbursed is from the World Bank; this percentage may increase somewhat during the early 1980s. Debt service is expected to be maintained at a level equivalent to about 4% of exports. The Bank's share of debt service is currently about 10% and may increase to about 20% by the end of the decade. 13. In general, over the next few years, it is likely that the Government will need less external capital than previously forecast, largely because of strong commodity prices and oil earnings. At the same time, Malaysia has a serious income distribution and poverty problem. The country needs technical assistance and expertise to help develop poverty alleviation programs and to assist in designing and packaging projects that reach out directly to low-income families. The Malaysians believe strongly that project borrowing, particularly from development institutions such as - 5 - the World Bank, is necessary to assist them to mount an effective attack on poverty. Bank lending is therefore focused on strengthening direct government efforts to reduce poverty. PART II - BANK GROUP OPERATIONS IN MALAYSIA 14. The Bank has made 49 loans to Malaysia, totalling $1,157.5 million for projects in agriculture, education, population, power, water supply, sewerage, telecommunications, ports, railways, roads, and urban transport. Although in a number of cases disbursements have been slower than expected, the execution of Bank projects in Malaysia has generally been satisfactory. As of December 31, 1980, the effective loans to Malaysia held by the Bank amounted to $1,006.3 million. Twenty-one loans have been fully disbursed. Annex II contains a summary of Bank Loans and IFC investments, as well as notes on the execution of current projects under implementation. 15. Since Malaysia is currently a resource-surplus country, it can finance most infrastructure projects without Bank assistance. The Bank-s present lending strategy in Malaysia is to support the Government s programs to combat the deep-rooted problem of poverty in the country, particularly in the rural areas. The thrust of this strategy is not simply to provide financial support to poverty alleviation projects but to develop an institutional and policy framework to enable the Malaysians eventually to design and implement antipoverty programs independently. With this in mind, the Bank has proposed to undertake projects with relevant institutions, such as the Agricultural Credit Bank (BPM), the Federal Land Consolidation and Rehabilitation Authority (FELCRA), the Rubber Industry Smallholders Development Authority (RISDA), and area and state development agencies in the poorer states in Malaysia, which should broaden their experience in the designing of projects and serve as a basis for building managerial and technical skills within these institutions. Technical assistance of this nature with a financial underpinning is considered to be the most effective way in which the Bank can best support Malaysian development at present. 16. Malaysia's own commitment to assist its low-income groups has strengthened significantly in the past few years. The Bank has been heavily involved in helping Malaysia identify and prepare projects geared toward the rural poor. Prior to 1975, this was done primarily through expansion of irrigation and land development as means of expanding output, raising incomes and creating employment opportunities. To reach more rural households, greater emphasis has since been given to programs designed to raise produc- tivity in existing smallholder areas. The number of rural development projects recently financed and in the current pipeline is impressive. Eight rural development projects were financed in the last three years, which include improvement of irrigation and drainage systems, rehabilitation of tree crops, national extension and research. At least 13 additional rural development projects have been identified for possible Bank support in the next few years. The proposed project focuses on improving the incomes of the smallholder rice farmers, one of the poorest groups in Malays-a. -6- 17. The Government's capability to develop such projects, however, remains weak, largely because of a shortage of trained manpower. With the help of the UNDP-financed and Bank-executed State and Rural Development Project, which provides technical assistance to selected federal and state agencies, the Bank is helping the Government to develop further its programs and projects for reducing poverty. 18. As part of its lending strategy, the Bank proposes to continue its involvement in the education sector in Malaysia by concentrating more heavily on technical and skill training. It is also taking initiatives in providing support to the manufacturing sector in Malaysia, especially in promoting the growth of small-scale industries, in order to enable the Government to realize its growth, employment and restructuring objectives. Assistance to infrastructure will be selective, concentrating on providing access to rural areas and rural electrification. 19. IFC has made six investments in Malaysia totalling $8.69 million. The total investments held by IFC as of December 31, 1980 amounted to $1.14 million (Annex II). Part III - THE AGRICULTURAL SECTOR General 20. The agricultural sector plays a dominant role in the economy of Malaysia, though its relative importance is declining as the country proceeds toward industrialization. The sector accounts for about 24% of GDP, 40% of export earnings, and 42% of employment. GDP in agriculture grew at an average rate of about 5% p.a. between 1973 and 1979. Based on past investments in tree crops and new land development, and continuing public sector investments, growth is likely to be sustained at 4-5% for the next decade. Agricultural production has been heavily export-oriented since colonial times; however, the composition of exports has changed significantly in the last decade due to the Government's policy of diversification in the sector. Rubber continues to be the single largest export earner, but its share has dropped from 40% in 1969 to 21% in 1979 as earnings from palm oil, wood products and cocoa have grown. Malaysia is the world's largest producer and exporter of both rubber and palm oil, supplying 42% of the world's natural rubber output and 49% of palm oil production in 1979. Agriculture's share of total employment has gradually declined from 53% in 1970 to 42% in 1979. The government expects the agricultural labor force to grow about 1% per annum for the next decade with industry and services absorbing increasingly larger per- centages of the total labor force. Continued growth in volume and favorable prices in agriculture, along with the expansion of manufacturing and the recent development of Malaysia's oil and gas reserves, have enabled the country to maintain a healthy trade surplus, estimated at about US$2.1 billion in 1979. -7- 21. Peninsular Malaysia has about 3.2 million ha, or 25% of its area, under cultivation, of which almost 2.3 million are in rubber and oil palms. Nearly two thirds of the tree crop area is in smallholdings. The other major crops are rice, grown on 478,000 ha, of which about half is double cropped, and coconut, with 337,000 ha. Other crops (each occupying below 40,000 ha) are pineapple, cocoa, cassava, sugarcane, tobacco, coffee, pepper and groundnuts. Output has grown rapidly over the past decade; rubber output increased 100% and oil palm by 300%. Output of rice increased by 90%, primarily due to improved and expanded irrigation facilities. Domestic production of rice supplies 85-90% of consumption requirements. With population growing at 2.7% p.a., an additional 45,000 tons of rice are required each year just to maintain the current per capita consumption level. The Government has formulated three basic objectives with regard to rice: (a) to increase the incomes of padi farmers; (b) to achieve self-sufficiency in rice production; and (c) to provide reasonably priced rice to consumers. 22. Notwithstanding the impressive overall performance of the Malaysian economy, some 36% of the population had incomes below the official absolute poverty line in 1978. Two thirds of those were in agricultural households, where the incidence is about 55%. Among rice farmers, about 74% have family incomes below the absolute poverty line. According to a 1980 Bank report on rural poverty in Malaysia, a farmer with no off-farm income needs 2.4-2.8 ha of single cropped rice to achieve an absolute poverty level income of US$300 per capita; however, the average and median size holding is 1.2 ha. Government Strategies for Agricultural Development 23. Having officially adopted in 1970 the objective of poverty eradi- cation, the Government has employed two basic strategies. The first has been land development to allow the absorption of workers from low-income rural occupations to higher productivity employment. The second has been the provision of projects and programs aimed directly at increasing smallholder productivity. Aided by strong growth in the secondary and tertiary sectors, implementation of these strategies has conitributed to a significant decrease in the incidence of rural poverty: from 67% in 1970 to 55% in 1978. Strong industrial growth during this period provided enough employment opportunities outside agriculture to absorb two thirds of the increase in the rural labor force. Large scale irrigation projects that came into fruition in the early 1970s provided increases in rice productivity that significantly changed the income position of the project beneficiaries and allowed the country to reduce its imports from 42% of consumption requirements in 1967 to about 10% in 1979. Government agencies, such as the Federal Land Development Authority (FELDA), carried out land development projects opening up over 1.1 million ha of new lands, mostly for tree crops and resettled about 250,000 rural families. - 8 - 24. With Malaysia's strong industrial base and its financial resources, it is in a position to continue its efforts to increase the productivity of small farmers as a principal thrust of its poverty strategy. It could also implement income distribution measures such as increasing the prices received by poverty households for their output, reducing the price of essential consumer goods, or increasing net incomes by direct supplements. The Government has already begun to move in this direction as is indicated by the recent reduction in the rubber export tax and the increases in padi price supports, and subsidies for fertilizers and pesticides to rice farmers. Most recently, the Government has introduced a policy of eliminating interest charges on funds provided to agencies for poverty alleviation projects. Irrigation Development 25. Irrigation in Malaysia is confined mainly to the cultivation of rice. The Drainage and Irrigation Department (DID) was established in 1932 after a serious rice shortage in the early 1920s and the realization that overdependence on other countries for basic food supplies was risky. DID's responsibility was land improvement and water resources development, particularly with regard to rice, which had been cultivated as a wet season crop over some 100,000 ha, and treecrops, which had been established on about 40,000 ha in coastal areas subject to tidal inundation. Until the early 1960s, irrigation schemes were designed to stabilize production of a single crop of rice during the wet season, providing water to supplement rainfall during short periods of drought. In the early 1960s, the expansion of irrigation was accelerated as part of the massive rural development program after independence, and DID began aiming its programs toward double cropped rice by building storage dams, pumping stations, and upgrading distribution systems. DID has now provided irrigation facilities for all major rice producing areas, with the result that 80% of the country s 478,000 ha of rice land now has some form of irrigation facilities and over 50% is technically capable of double cropping. Although the major part of DID's program has been to provide irrigation systems in traditional rainfed rice areas, they have also undertaken projects to develop new land for rice production. 26. The Bank has participated in irrigation development in Malaysia since 1965 when it financed the Muda Irrigation Project (Loan 434-MA), followed in 1967 by the Kemubu Project (Loan 500-MA). Together, the project areas amount to nearly 120,000 ha, about 25% of the rice land in penin- sular Malaysia, and accommodate some 73,000 farm families. According to the Project Performance Audit Report (Report 1295, September 24, 1976), they were successful projects which helped to reduce rice imports from 42% of national requirements in 1967 to 17% in 1974 and resulted in increases of 75-100% in the incomes of project beneficiaries. Five other Bank-financed - 9 - projects under implementation will improve, expand and intensify irrigation over 116,000 ha of rice land and drainage over 212,000 ha of tree crops. These projects include, in addition to the irrigation and drainage infrastructure, provisions for strengthening agricultural support services such as credit, extension, processing and marketing. Coordination of the various agencies and departments is a major element in the successful implementation of the projects, and the Government has developed an effective organization for this purpose. A Steering Committee of federal and state officials is appointed for each project to guide and support a project manager, who is responsible for the progress of all components of the project. PART IV - THE PROJECT Project History 27. An extensive, largely undeveloped jungle area between the Rompin and Endau Rivers in Southeastern Malaysia was identified in 1976 for possible development as irrigated rice land. The National Small-Scale Irrigation Project (Loan 1444-MA) provided for a feasibility study of an integrated irrigation and land settlement project in the area. The Government engaged Snowy Mountains Engineering Corporation (SMEC) to prepare the feasibility study under the guidance of an interagency Steering Committee. The consultant submitted an inception report in May 1978, an interim report in December 1978, and a final report in November 1979. Early study results revealed that the total area south of the Rompin River suitable for rice was much less than originally anticipated, and the terms of reference were amended in early 1979 to include the study of an additional 4,200 ha north of the Rompin River. The Steering Committee considered the consultant's final report in March 1980 and accepted it for implementation. The project was appraised in April 1980. Negotiations were held in Washington, D.C. from January 22 to 29, 1981. The government delegation was led by Mr. Yahya Yaacob, Deputy Under Secretary, Ministry of Finance. Details of the project are provided in the Staff Appraisal Report entitled "Malaysia - Rompin-Endau Area Development Project" (No. 3160-MA, dated February 19, 1981) which is being distributed separately to the Executive Directors. Supplementary project data are given in Annex III. 28. A major issue during project formulation was the amount of padi land to be allocated to each settler family. Consideration was given to estate rice culture or to relatively large, fully mechanized family farms from 4 - 8 ha in size. Both of these alternatives were rejected because the quality of management necessary for operation of such farms is not available and because their contribution to the alleviation of rural poverty would be - 10 - negligible. The alternative of a 1.2 ha (3 acres) size holding (the average size padi farm in Malaysia) was also rejected on the grounds that farmers on such holdings would not be fully employed and would not earn enough to raise their families out of poverty. The size chosen, 2.4 ha (6 ac), would fully employ the head of each settler household and give substantial part-time work to other family members. 29. A second important issue is how the project would affect the traditional life style of about 200 aboriginal families (Orang Asli) in the project area. While there would be some loss of agricultural land and of some areas which traditionally have been used for gathering of forest products and hunting, the project would result in a general improvement in the economic opportunities open to the Orang Asli and would require little physical displacement. The Orang Asli families, along with other local residents, would be given priority for settler status in the project. They would be allowed to maintain their small units in contiguous housing blocks within the new farm settlements nearest their traditional homes. They would also be given priority rights to participate in the fishery cage culture scheme in the project area. The Orang Asli welcome the project and several of the village leaders have expressed to the Government their group's desire to participate in it. Project Description 30. The proposed project would provide for construction of irrigation works and development of new land for double cropping of rice on about 11,400 ha in four subprojects along the Rompin, Pontian, Anak Endau and Endau Rivers in southeastern Pahang State on the east coast of Peninsular Malaysia (see Map 15104). It would also provide for construction of housing, and social facilities for about 4,750 families who would be settled in the project area to work the new irrigated rice farms. The proposed project would focus on one of the major identifiable groups with the highest incidence of poverty - the smallholder rice farmers - and address two of the main factors responsible for their poverty, the small size of holdings and the low productivity of rice land. 31. The main features of the project are: (a) land clearing on about 13,800 ha of swampy tropical forest; (b) construction of an earthfill dam on the Anak Endau river, a cutoff channel and ancillary works on the Rompin river, and three weirs, one each on the Pontian, the Anak Endau and Kembar rivers; (c) construction of about 110 km of main and secondary canals, 130 km of drains, 95 km of dikes, and 12 pumping stations; - 11 - (d) construction of tertiary and quaternary canals and drains for a net irrigable area of 11,400 ha; (e) construction of about 45 km of access roads and about 150 km of farm roads; (f) construction of two subregional centers and six farm settlements with physical and social infrastructure for about 4,750 settler farm families; (g) construction of office buildings, staff quarters, workshops, stores and agricultural service facilities; (h) procurement of equipment, vehicles and supplies for project opera- tion and maintenance and for agricultural support services; and (i) consulting services for detailed design and construction supervision of project works. Project Implementation 32. The project would be implemented over six years, from mid-1981 to mid-1987. The Government has appointed consultants to prepare the final designs, construction plans and tender documents and to supervise construc- tion of the project works. Preparation of detailed designs and tender documents is sufficiently advanced for procurement to start shortly after loan approval and for construction to start on schedule. CorLtracts totaling about US$18 million would be awarded during the first year of the imple- mentation period. These would include land clearing, river diversion works, main roads, drains, dikes and appurtenant structures in the E'ontian, Anak Endau and Rompin subprojects. Land clearing would start in April 1981 on the Pontian subproject, which is the most accessible; this would be followed by the weir, the irrigation works and the tertiary development. Farm settle- ments would be completed in coordination with the irrigation infrastructure. The work on other subprojects would be undertaken progressively as the design and tender documents are prepared. The agricultural support staff and facilities would be built up in phase with the completion of the irrigation and settlement infrastructure, and the selection and placement of settlers. The first rice production in the project area would start with the off-season crop in 1984. The entire project area would be unider cultivation by the beginning of 1988. Project Cost and Financing 33. The total project cost in mid-1981 prices is estimated at US$141 million with a foreign exchange component of US$59 million or 42% of the total cost. Because of the tax-exempt status of the implemeniting agencies, - 12 - the costs do not include taxes and duties. Quantity estimates for all major work items, based on feasibility designs, were prepared for the project works. Unit prices for the work items were based on recent contracts for similar works carried out for DID, Public Works Department (PWD) and the Pahang Tenggara Development Authority (DARA) in this region of Malaysia. All construction costs were updated to reflect recent unit cost increases. The costs for equipment and vehicles are based on recent bid prices. Physical contingencies of 20% were applied for irrigation, drainage and road works, 10% for settlement works and 5% for project buildings, vehicles, and equip- ment. Expected price increases over the project implementation period of six years amount to about 27% of the base cost plus physical contingencies, assuming cost escalation (for both local and foreign elements) of 9% in 1981, 8.5% in 1982, 7.5% in 1983-85 and 6% in 1986-87. 34. The proposed Bank loan of US$40 million would finance 68% of the foreign exchange requirements of the project cost. The Government's contribution of US$101 million would finance the balance of the costs through annual budgetary allocations. Currently, the Government is exploring possible cofinancing arrangements to secure the additional US$19 million of foreign exchange required. Operation and maintenance costs of the completed works as well as the costs of agricultural extension would be financed by the State of Pahang. Procurement 35. Construction contracts scheduled for international competitive bidding (ICB) and local competitive bidding (LCB) are as follows: Construction Contracts ICB LCB …-------- US$ million -------- Land clearing, main drains & roads (5)/a 21.5 (2)/a 2.5 Diversion works (4) 27.5 (1) 0.5 Irrigation works (-) - (10) 23.0 Settlement works (2) 24.0 (6) 13.0 Project buildings (-) - (3) 4.0 Total (11) 73.0 (22) 43.0 /a Figures in parentheses are numbers of contracts. Five contracts combining land clearing with construction of main drains and access roads would be awarded following ICB procedures in accordance with Bank Group Guidelines for Procurement. These contracts will combine land clearing with site development in order to ensure early access to the sites - 13 - and minimize the problems of coordination among contractors. ICB would also be used for the Rompin cutoff channel and dikes, the Anak Endau dam and weir, the Pontian weir and the two subregional centers. There would, therefore, be eleven ICB contracts totalling about US$73 million including contingencies, ranging in value from about US$2.5 to US$15 million. The remaining works would be spread over the project area and would be phased over six years. Previous experience in Malaysia indicates that these are not large enough to attract a response from ICB, therefore, about 22 contracts would be awarded following local competitive bidding procedures, which are acceptable to the Bank, in which foreign bidders would be eligible to participate. The LCB contracts would range in value from about US$100,000 to US$2.5 million, totalling about US$43 million. 36. Purchases of agricultural and O&M equipment, service vehicles and supplies totalling US$4.7 million would be scheduled into convenient packages for procurement under ICB procedures in accordance with Bank Group Guidelines. A 15% preference margin, or the prevailing customs duty if lower, would be extended to local manufacturers of these items. Off-the- shelf items costing less than US$35,000 each and limited to a total of US$2.0 million, would be procured through normal government procedures. Local competitive procedures are acceptable to the Bank, and foreign firms are allowed to participate. Force account work would be limited to the fabrication and supply of gates and hoists for water control structures. This is estimated to cost about US$0.6 million, which is less than 1% of the total project costs. DID has been fabricating its own gates and hoists in its Federal Workshop in Ipoh for more than 15 years. Disbursements 37. Disbursements would be made at the rate of 100% against the foreign exchange expenditure on directly imported equipment and vehicles, 100% of the ex-factory cost of such items manufactured locally, and 80% of the cost of imported items procured locally. Disbursement for civil works executed by contract would be 24% of total costs. For consulting services, disbursements would be 100% of the expenditures incurred. No disbursement would be made for force account expenditures. It is expected that disbursements would be completed by June 30, 1988. Accounts and Audits 38. The agencies involved in the project are all subject to normal Government controls and audit procedures which are satisfactory to the Bank. Assurances were obtained during negotiations that all agencies involved in project implementation would maintain separate accounts which would be collated by the Project Manager, and that the Government would furnish the Bank such information regarding these accounts as the Bank might reasonably request (Section 4.02 of the draft Loan Agreement). - 14 - Organization and Management 39. Appointment by the Ministry of Agriculture (MOA) of a suitably qualified and experienced Project Manager is a condition of loan effectiveness (Section 5.01 of the draft Loan Agreement). The Government foresees no difficulty in making this appointment promptly. The Project Manager would be guided in policy matters by a Steering Committee co-chaired by the Secretary General of MOA and the Chairman of the Agricultural Committee of the State of Pahang. This follows the pattern of several previous area development projects in Malaysia, beginning with the Western Johore Agricultural Development Project (Loan 973-MA). The Project Manager would coordinate all the project functions including timely land alienation, land clearing, construction of irrigation and other infrastructure, placement and administration of settlers, and provision of supporting services. He would be the Secretary of the Steering Committee and have direct access to the top officials of the State Government and the Federal MOA. This structure has worked well in the past and is in line with the federal and state responsi- bilities and jurisdictions under the Malaysian Constitution. To improve this structure, the Government has recently decided that in the future all funds for implementing integrated agricultural development projects will be allocated to MOA which will in turn allocate them to the implementing agen- cies. The Project Manager would have adequate support staff to assist him in administration of the project. 40. DID would be responsible for design, tendering, and supervision of land clearing and civil works construction. However, as DID is currently designing and supervising construction of six other Bank financed projects - 140,000 ha of irrigation and drainage for rice and 230,000 ha of drainage for tree crops - in addition to numerous Asian Development Bank and locally financed projects, it is experiencing a shortage of mid-level engineering manpower. Due to these manpower constraints and the need in this project to design large irrigation works, the proposed loan would finance consulting services to assist DID in the detailed design and construction supervision of the project works. 41. Construction of the eight villages would be the responsibility of the Pahang Tenggara Development Authority (DARA), which is a statutory body created in 1972 for promoting the economic and social development of Southeast Pahang. Its Board consists of both federal and state represen- tatives and it receives funds for infrastructure development as grants from the Government. Consulting Services 42. The Government has engaged a consultant, Sepakat Setia Perunding Sdn Bhd, in association with the Snowy Mountains Engineering Corporation (Australia), to design, prepare tenders and supervise construction of the irrigation, drainage, road and land clearing components of the project under - 15 - DID supervision. This arrangement has been accepted by the Bank. The consultant would be required to prepare a designer's operating manual and a technical record of design and construction. Consultant costs would be about US$6 million. This provides for about 850 man-months over a period of six years, vehicles, engineering survey costs and equipment, local transportation and other minor costs. The average man-month cost (including international travel and subsistence) is estimated to be about US$3,800; the average local man-month cost is about US$2,000 (550 man-months) and the average expatriate man-month cost is about US$7,000 (300 man-months). Agricultural Support Services 43. Under the general direction and administrative control of the Project Manager, agricultural support services will be provided by the various departments and agencies under the Ministry of Agriculture (MOA) and by the semi-autonomous National Padi and Rice Authority (LPN) and Farmers' Organization Authority (FOA). Assurances were obtained during negotiations that the Government would provide adequate funds for the National Padi and Rice Authority (LPN) and the Farmers' Organization Authority (FOA) to supply padi drying and storage, and rice milling and marketing facilities in the project area as needed (Section 4.04 of the draft Loan Agreement). The Department of Agriculture (DOA) will have responsibility for agricultural extension, and will prepare an agricultural services operations manual as a guide for field staff by January 1, 1984 (Section 3.07(b) of tbLe draft Loan Agreement). Livestock/poultry and fishing extension services wrill be provided by the Department of Veterinary Services (DOVS) and the Department of Fisheries (DOF), respectively. DOA will operate a 60 ha seetd farm and farm mechanization development center. The seed farm operation will produce appropriate high quality seed sufficient to allow seed stock re!newal for all project farms every third crop. DOA will also monitor and report crop progress, disease or pest outbreaks, etc., and will manage the supply of fertilizers and other agricultural chemicals under the national padi subsidy scheme. Mechanization services - plowing, combine harvest and transport will be provided, at cost to the farmers, by FOA through its local farmers' cooperative. It is anticipated that, as this is a new rice area, most plowing and harvesting services will have to be provided by FOA in early years of the project, with private contractors and the farmers themselves taking over up to one-half of this task as the local rice economy matures. Rice research and field variety trials will be conducted in the project area by the Malaysian Agricultural Research and Development Institute (MARDI). The Kuala Rompin branch of the national agricultural bank (BPM:) will provide needed agricultural credit and general banking services. Operation and Maintenance 44. The State DID would operate and maintain irrigation and drainage facilities and works to the tertiary level. Quaternary irrigation ditches and drains would be maintained by the farmers. Diversion structures, dikes, farm roads and tracks would also be maintained by the State DII). Main roads, built to PWD standards under contracts administered by DID, would be - 16 - maintained by the State DID until'project completion, when PWD would take over maintenance responsibilities. During negotiations assurances were obtained that DID would prepare on completion of the final design of each subproject, an operations manual for the project works (Section 3.07(a) of the draft Loan Agreement). State DID personnel would work as a team with agricultural extension personnel in dealing with farmers on such matters as irrigation and planting schedules, water control and management, and other matters relating to operation and maintenance of the irrigation system. Safety of Dams 45. During negotiations it was agreed that the Government would employ an independent expert or panel of experts, acceptable to the Bank, to review the consultant's design of the Anak Endau dam and the Pontain weir before start of construction and to determine during construction the need for any design modifications (Section 3.09 of the draft Loan Agreement). The Government would prepare an engineering inspection program to ensure the safety of the Anak Endau dam and the Pontian weir which would be furnished to the Bank for review no later than one year before the completion of the dam and the weir (Section 3.10 of the draft Loan Agreement). Environmental Effects 46. Adverse environmental effects of the project would be minimal. No loss of habitat critical to endangered species is expected. The declaration as "Environment Forest" of the peat swamp areas between the Rompin and Endau rivers and extensive areas to the southwest, as recommended in the Pahang Tenggara Master Plan, would provide additional sanctuary to the displaced deer, monkeys, birds and snakes. The DOF plans to increase significantly the production of fresh water fish in Pahang State by fostering aquaculture in the irrigation canals and reservoirs. Project development would not interfere with the migration of commercial prawns between the estuarine and riverine sectors for the breeding and maturation phases; however, the extent of the natural breeding habitat may be reduced. The incidence of malaria is low in the project area. There would be a possibility of introduction of malaria through the immigration of settlers. The Malaria Eradication Program and Pahang Health Department would institute monitoring procedures and undertake appropriate remedial measures as needed. The malaria control program in the state is making good progress. Preventive and remedial measures for the project area would be integrated into the regional programs. Health centers would be provided in the farm settlements and subregional centers in the project. During negotiations an assurance was obtained that the Government would take all measures necessary to ensure that the design, construction and operation of works under the project are carried out in accordance with appropriate ecological and environmental standards (Section 3.12 of the draft Loan Agreement). Settler Selection and Administration 47. The settlers would be traditional lowland rice farmers, able-bodied, either landless or owning uneconomic holdings and would be selected by the Pahang State Government, partly from within the state (about - 17 - 2,750) and the balance (about 2,000) from rice farming areas in other states. Priority would be given to farmers living in the project area. Each settler would sign an agreement specifying the rights and responsibilities of the settler and the Government. Settler selection criteria have been agreed with the Bank in substance and will be submitted in detail, along with the Government-settler agreement, for final review and comment prior to June 30, 1981 (Section 3.08 of the draft Loan Agreement). The project management would develop the land to a stage where farmers can prepare theLr own fields for planting the first crop; they would be obligated to follow prescribed cropping schedules and practices. The settler would repay the czost of developing his land and constructing his house and the cost of any subsistence and agricultural inputs given to him before his first rice harvest. He would ultimately own the land and the house after 'he has paid back the costs. During negotiations assurances were obtained t'hat the Government would take all necessary measures to ensure that no farms in the project area would be fragmented or fall into the hands of absentee landlords (Section 4.03 of the draft Loan Agreement). Cost Recovery 48. Water charges would be treated along the lines of previous Bank-financed irrigation projects in Malaysia. In Malaysia operation and maintenance costs are being funded from general state and federal revenues. Nominal water and drainage rates are collected by state governments and form part of the general revenue. As Muslims, most settlers would be subject to the compulsory religious tithe which in Pahang State is levied at a rate of 10% of gross value of annual padi production less a one-ton subsistence allowance. Proceeds are utilized by the state government for maintaining community facilities and services. The tithe would average about US$500 /1 per farm per annum at full development, about twice the irrigation system operation and maintenance costs per farm. Settlers would be required to repay the capital costs for their houses and for land clearing following the FELDA model. However, no interest would be charged for the housing and land clearing loans since it is current government policy to eliminate all interest rate charges for projects aimed at poverty alleviation. 49. Repayment of housing costs over 15 years with a 2-year grace period would require annual payments of US$140 per family. Repayment of land clearing costs over 20 years with a 10-year grace period wqould entail annual payments of US$320 during the repayment period. Altoget:her, settler families would have annual tax and debt retirement obligations of about US$630 (17% of pre-tax net farm income) for the 3rd through 101th years after receiving their land, US$975 (25%) during the 11th through 15th years, and US$835 (22%) during the 16th through 20th years and US$515 (13%) thereafter. Based on present values of project rent, costs, fees and taxes discounted at /1 All cost and benefit estimates are valued in 1981 prices unless other- wise indicated. - 18 - 10% (excluding settlement costs and housing cost recovery), the total project rent recovery index is 44%. The cost recovery index is 24%, which index is comparable to those of other Bank-financed irrigation projects in Malaysia. The projected level of cost recovery is considered adequate because, even after full development, settler families are expected to have per capita incomes of about US$700, which is less than the estimated 1992 per capita critical consumption level of US$790. Benefits, Justification and Risks 50. By developing new land, providing flood and salinity control, irrigation and drainage infrastructure and integrated agricultural support services, the project would result in 190% cropping intensity on about 11,400 net ha currently under swamp forest. About 4,700 families, mainly new settlers, or about 24,000 people, would directly benefit from the project. 51. The project would contribute to the Government's goals of self- sufficiency in rice and more balanced regional development at a capital cost of about US$23,000 per farm family or US$9,600 per ha in financial prices. The cost per farm family is higher than in other recent Bank-financed irrigation projects in Malaysia, which range between US$2,000 and US$4,400, because, unlike previous projects where existing physical works were upgraded, in this case all works are new and the project includes settlement of new families. Incremental padi production per hectare at Rompin-Endau is expected to be higher than recent projects. As a result the capital cost per ton of incremental padi production capacity (US$1,250) is comparable to such projects (US$1,590 at Muda and US$870 at Krian-Sungei Manik). Compared to previous land settlement projects, the cost per family (in 1981 prices) is lower than Keratong (US$48,400) and Johore (US$34,600) and higher than FELDA VI (US$12,500). This project would provide somewhat better income levels for the direct beneficiary families than would the other projects. Most eligible settler families are expected to have present annual incomes of about US$125 per capita. By 1992 at project completion they should have achieved per capita income levels of about US$700, above the projected absolute poverty level of US$320 per capita yet below the critical consumption level of US$790. In contrast, the Krian-Sungei Manik and Muda II irrigation projects will provide average per capita incomes of about US$350 and US$400 respectively and the Keratong, Johore and FELDA VI settlement projects incomes from about US$400 to US$600 per capita. 52. The incremental annual production of 87,000 tons of padi would result in annual net foreign exchange savings of about US$29.7 million. In terms of its employment impact, the project would create an annual demand for farm labor of about 2 million labor days, equivalent to some 9,500 full-time jobs. . 19 - 53. The overall economic rate of return for the project is 17%. Rates of return for the subprojects are 15% for Rompin, 17% for Pontianl, 17% for Anak Endau, and 19% for Endau. Respectively, these subprojects account for 39%, 14%, 37% and 10% of total project costs. The poverty redressal aspects of the project would contribute to a high social rate of return. Capital costs of settler housing and other settlement facilities and services, US$25.2 million, were not included in the economic analysis because it was assumed that benefits of this project element, though unquantifiable, would be at least equal to its cost. The sensitivity of the estimated rate of return for the entire project was tested to cost overruns, reduction of benefits and implementation delays. Under various assumptions, the economic rate of return remained acceptable. For example, taking the worst case, if net agricultural benefits decreased by 20% and capital costs increased by 20%, the economic rate of return would be 11.1%; if agricultural benefits and costs were delayed 4 years, the economic rate of return would be 10.9%. 54. This project involves no unusual risks. Those risks normally associated with area development projects based on irrigated agriculture have been taken into account in estimating yields, cropping intensities, rates of development, and investment costs. PART V - LEGAL INSTRUMENT AND AUTHORITY 55. The draft Loan Agreement between Malaysia and the Bank, and the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement are being distributed separately to the Executive Directors. The appointment of a suitably qualified and experienced Project Manager is a special condition of effectiveness. Special conditions of the loan are listed in Section III of Annex III. The draft Loan Agreerent conforms to the normal pattern for loans for irrigation projects. 56. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART IV - RECOMMENDATION 57. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Washington, D.C. February 26, 1981 -20 - A2NEX I PAge 1 of 5 TABLE 3A MALAYSIA - SOCIAL INDICATORS DATA SHEET MALAYSIA REFERENCE CPOUPS (WEIGHTED AVE%ArES LAND AREA (THOUSAND SO. IKM.) - MDST RECENT FSTIIIATE )- TOTAL 329.8 AGRICULTURAL 65. 1 MOST RECENT MIDDLE INCOME MIDDLE INCOME 1960 lb 1970 /b ESTLYIATE /b ASIA 5 PACIFIC LATIN AHERICA 6 CAPIBBFAr GNP PER CAPITA (US$) 250.0 470.0 1320.0 1114.7 1562.9 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 242.0 469.0 716.0 842.4 1055.9 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 8.0 10.7 13.3 URBAN POPULATION (PERCENIT OP TOTAL) 25.2 2 7.0 28. 8 39. 1 63.4 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 20.0 STATIONARY POPULATION (MILLIONS) 30.0 YEAR STATIONARY POPULATION IS REACHES 2070 POPULATION DENSITY PER SQ. 104. 24.0 32.0 40.0 376.1 20.1 PER SQ. Of. AGRICULTURAL LAND 152.0 185.0 204.0 2350.4 81. 7 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 45.1 45.4 42.2 40.4 41.4 15-64 YRI. 51.3 51.5 54.4 56. 2 54. 7 65 YRS. AND ABOVE 3.6 3.1 3.4 3.4 3.9 POPULATION GROWTh RATE (PERCENT) TOTAL 2.5 2.9 2.7 2.4 2. 7 URBAN 5. 5 3.6 3.6 4.1 4. 1 CRUDE BIRTH RATE (PER THOUSAND) 39.1 32.6 29.0 28.7 34.8 CRUDE DEATH RATE (PER THOUSAND) 9. 1 6.8 6.0 7.9 8.9 GROSS REPRODUCTION RATE .. .. 1.9 1.9 2. 5 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 56.0 00.4 USERS (PERCENT OF MARRIED WOHEN) .. 7. 0 36.0 39. 0 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 85.0 99.0 107.0 116.9 106.9 PER CAPITA SUPPLY OP CALORIES (PERCENIT OF REQUIREMENTS) 105.0 113.0 117.0 108.9 107.4 PROTEINS (GRAMS PER DAY) 48.0 51.0 57.0 60.3 65.6 OF WHICH ANIMAL AND PULSE 16.0 18.0 22.0 18.8 33.7 CHILD (AGES 1-4) MORTALITY RATE 9.0 5.0 3.0 5.3 8.4 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 57. 0 64.0 67.0 63. 0 63. 1 INFANT MORTALITY RATE (PER THOUSAND) 75. 0 41.0 31.0 52.8 66.5 ACCESS TO SAFE WATER (PERCENT OP POPULATION) TOTAL - .. .. 62.0 42.4 65.9 URBAN .. .. 93.0 62.1 80.4 RURAL 49.0 29. 7 44.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 59.0 60.0 52. 8 62.3 URBAN .. 100.0 100.0 71. 1 79.4 RURAL 43.0 43.0 42.4 29.6 POPULATION PER PHYSICIAN 6937.0 4260.0 4347.0 4120.1 1849.2 POPULATION PER NURSING PERSON 1776.0/d 1246.0 1079.0 2213.6 1227.5 POPULATION PER HOSPITAL BED TOTAL 265. 0_/ 285.0 306.0 819.4 480.3 URBAN .. 86.0 RURAL 1900.0 ADMISSIONS PER HOSPITAL BED .. .. 17.2 28.08 8OS0ING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.9 5.6/e URBAN 5.9 5. 9/. RURAL .. 5.5/e AVERAGE NU0BER OF PERSONS PER 00H TOTAL 3.0 2.6/e URBAN 2. 3 2.3/ . RURAL .. 2. 8/e .. . . ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. 43.0/e URBAN 82.9 84. 7 * RURAL 3 - 21 - ANINEX I Page 2 of 5 TABLE 3A MALAYSIA - SOCIAL INDICATORS DATA SHEET MALAYSIA REFERENCE GROUPS (WEIGHTED AVE CAES - HOST RECENT ESTIMA Aa MOST RECENT MIDDLE INCOME MICDLE INCOME 1960 /b 1970 /b ESTIMATE /b ASIA & PACIFIC LATIN AMERICA & CARIBBFAN EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 96.0 91.0 93.0 98.6 99.7 hlALE 108.0 95.0 94.0 99.2 101.0 FEPIALE 83.0 87.0 91.0 97. 7 99.4 SECONDARY: TOTAL 19.0 35.0 43.0 55.5 34.4 MALE 25.0 40.0 47.0 60. 7 33.5 FEMALE 13.0 29.0 38.0 49.9 34.7 VOCATIONAL ENROL. (7 OF SECONDARY) 5.0 3.2 2.9 13.7 38.2 PUPIL-TEACHER RATIO PRIMARY 28.0 31.0 32.0 34.6 30.5 SECONDARY 38.0 26.0 27.0 28.5 14.5 ADULT LITERACY RATE (PERCENT) 53.0 55.0 .. 85. 8 76.3 CONSUtlPTION PASSENGER CARS PER THOUSAND POPULATION .. .. .. 9.0 43.0 RADIO RECEIVERS PER THOUSAND POPULATION .. .. .. 118.9 245.3 TV RECEIVERS PER THOUSAND POPULATION 3. 2 18.0 45.0 39.4 84.2 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 61.0 65.0 87.0 .. 63.3 CINEIA ANNUAL ATTEIEDANCE PER CAPITA 16.0 9.4 9. 1 4.9. LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 2745.3 3622. 2 4789.0 FE;ALE (PERCENT) 27.0 31.4 33.0 36.8 22.2 AGRICULTURE (PERCENT) 63.1 56.0 50.0 51.9 37.1 INDUSTRY (PERZCENT) 11.7 14.0 16.0 21.9 23.5 PARTICIPATION RATE (PERCENT) TOTAL 34.2 33.8 33.9 39.1 31.5 MALE 48.8 45.7 45.9 48.5 48.9 FEMALE 18.9 21.5 21.5 29.6 14.0 ECONOtMIC DEPENDENCY RATIO 1. 4 1. 5 1.3 1. 1 1. 4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOtiE RECEIVED BY HIGHEST 3 PERCENT OF HOUSEHOLDS .. 27.0 HICHEST 20 PERCENT OF HOUSEHOLDS .. 56.6 LOWEST 20 PERCENT OF HOUSEHOLDS .. 3. 3 LOWEST 40 PERCENT OF HIOUSEHOLDS .. 10.6 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 279.0 RURAL .. .. 252.0 192.1 190.8 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 313.0 .. 474.0 RURAL .. .. 283.0 182.5 332.5 ESTILATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. i1.0 RURAL .. .. 46.0 33.2 . Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of date and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1978. /c 1957; /d 1962; /e West Malaysia. Host recent estimate of GNP per capita is for 1979, all other data are as of April, 1980. October, 1980 - 22- ANNEX I Page 3 of 5 DtEFINITIONS ijf SOCIAL INUTCATORS Notes' Although the dat are drao fro sore gnrly jugd h most authooccati-m aid reliabl,_it should a.lsoh noted that they may net be inlte- natonll cmprale ecus o te oo of...audardiend deifintion -ed ootpt nd ydfrIr ntrtes in -o11etring the dta. Th. data arm, none- theless,.. usful tobdeso,,rtl orders of antuc,idicae trends, andosate te rnsnmjor diff.eo..te bet.ee. outres The.neree rup -r (1)1 the same -nunry grop ot the nubjut, country and Ill a.counry group nub sonehat higher s'eetge inoee than the -oratry geuP of theIIieico r (enep fur "aPital Suplus oii Enpoer"grop wher "Midgdle income North Aflicc and Middle tact is nhnsen henaus of sr e lenI afo h ooilni ru a,ui o htidoto.Snetertr ge ..of conres amog the indi.t...r depends Os tha avilability o darae isu -uiform, cationms e ouroined inrlaing noroges of one indtciro. to nootler . These.. averge re only ..sefol in toaparig the veins ofueindice- or atce oinoog the ouury and oofroc groaps. LADOf AREA (thou....d sq.k.. ... olilon. ger Ph,.sitis ?-fpotlei dtvidsd hy nbna or e pn...tttnia Phy- Trotal - Totalsuft ars -pmtiletog land area aod tnlaadwa-rom- ait.n. qaslifted true andioe1 sobool am anio ity level. Agricultural - bst eatof agricultralae r eprrlio esnoly fplnu per Nftrsin Pesron - Pepalatien dioided by n'bsr nf pet.tiefag PooltlnBe tsitol Bed - total tan a esa Ppsltien (ftatl. lNif PIER CAITA (11$) - GNP pero -pite e tmnEn a t .u...nt market prIce, ca1- arba, and eatsl) didebytir reaettes. nsbee beepita1 ha." calne b nt cuvolo mthod on lurid Bank Atlas 7i97P79 seo;19601,b, vial in public rdprivate genral and aplohlised hapita1 sadem 19170, and 1979 dat.bbittirn tennr.dH.ptl aesnhiheespea.nl tf .byitlnss t oe hsiin.itahlisormentblpendi priseistly etefdha EaNERGt CoONSUMPTION PE i AP IayTA - annual connoption of cueca nry(ol caeaennicue.ieral, tboeissle. hesrever pine led elth atd mdi and lIgnite, petroleum, 8ntra -e end hydr--, malarad geotherns elec- totneee Pot peraently ateffad hy * phyincan (bet by a medieal asiBtmat, tricity) In kilogese of coal eqaba_e. pot c..pita; 1960, 197i 0.t.d 19798are Idwife, etc.) whith mf.se in-patient aes-datis ad pemedA a deta. ltitted eange of medical fniliniss. Po astisnital peepes asbi bao- nels inniade Z.n priuipa1 general and apmialied heapitale - d enea1 POPLILATION AND VITAL STATISTICS ~~~~hoepitele local or meal h-apitas and medial md stateity n-tsem Total Popullaion, fild-Ye- (silli-os) - Au of Joly 1; 1960, 1970, end 1979 Admia, srtNeia e ea abrn disnat edahea deta. from ~~~~~~~~~~~~~~h.epitol dtidsd by cte. saber ef beds. IrbarPpltnelecn of tn-ai - natlo of orb an to tonal populariu-, different defiitint_n of rbao ress map effect ...nparability of darn HOUSING am.g ron trile; 1960, 1970, aud 197f dacs. Av-rgn tia. of goos..ho!d fee.....e ear h.-seheld) - totel. -bha. tad leti- Pre... lonProti ctinaA h...ehold t-nistsfagespo idlid-:aa e share litcing qeatrtesa Popula~tion is year C200 - Cuoe- poplation projectom see base.d on 19N0 and thei. anm e A hoarder or lodgermy-n may met he inldad ha tona Pupalatior by age end sted their mortality and fertili-ty raise the householid for sttistinel porposes. Prjcinpseetea lor etrlipy rtote aonprias cf three levels asec- A-erogenmbee of persons Pet en_m- teta.1 eba,. ad fetal - Av-na s ing lit. e. _t_ctc as bith istr ... ig with ounv' per ispita Inoum btr of persons Per Om oil urban and me en1enpied enmoatinn1 level, en femlelife ecysot-oocy etahliaiug at 77 .1 Yet..' The pare- danIitige, r-p-oiey Issellings erlde s_n-seaet ateanesad mees foefetilty rt ashvethree leel- asuin deolioe Io unoocupied perta. fertility acoorTding to lucerne leve and past famIly pleaing perfnrma.u.... ooses to Eleotrioitr (reroent of d.allisas) - tta. sebma VWd essal- tech. cnutoy is then assigned one of thea alas cmbination of nortality onetoon delig wt sisoteinity in living qagetete saplfetaga and ferYtIlityItrends for proJettien puro f o ol,bode, end total desklingrs-peotiv-ly. Stationar pneatio -l a s .tationa.ry paps1iatio there Is un grmeth since the bIrth rate is equal tote et res,me asoth e tructue.sre- CAI mains constant. Th is in achlnvd onlY aftrferiiY et declinat Ndod tenlatiteio the roplacement level of utit set tepodunmion rate, when ...h geneosItion Piayehe oal aeadt l-eesta,ml a l adone epats ift ..actly. heertiniypoultinalsdaso Enlmn o l ge tte rmr1lvlaspeaagse tsas esiaedaf h bssoftepo_re haatrlnr f b oulto piayscoiee onatit eeal seam .,ds ae - In the Year dill, and the rate of decline of fertility rtPorpae easbtaiee orpifrn aab fpiayaaein e 'Pt eet cutries witb an fv-re t 1dnst tn aenDen maIy aaad-.1ff pfrea tea aatomroooalaio t rocad- The yea when t-tiomry ppoplation mYt some paplsg aore heiti or otv th eftinlal anham as.- else has hma reached Seconday school - total.mlanfas - Cn.esd - atne; .a-.md-Y Pouain Hsat ednootian esquires i aet, 10 hrrr.) f t ..s. fPoer yasra nof pp_ed pefa_e i_aeeim iotsl area- usna1i~~~~~~~~~~:~llydof 12 to 17 yeses of age; onre...p-nea.. .ewe_m as ina Pea sq ha. l,griculturad land-In oe a bo fcc aglrioltucl1 land Vo-t.oluda..1-tV ti l tti PouainAeitrucure (perc...t) - Children (0-iA years), corking-ag 715- icuen nis,idetris,meocher pnrsebe prt naa NAyas,edretired (65 years andnoeasprntgsof mid-eaPP detrly o.rhas l d Ianet f eodr ntittea Pauoto rownh Rso (enroen) - total- Anual gr.h racsfmoe mi-Frimary and secendary levels divided by eabers of esan.he.e in ths Populatina iroeh bat per.tni -rha - Annual ge-s rates of urban popo- Adult Iltracy rate (esrloet) - Litera.te edulsa (ahis te rad and -its) loinsfe 9160,, l9O6-7I, and 1970-78. epernentoge of total adelt pmpalatinn aged1 yass and mvet Crude Birth ltane artouad) - Annual IveI births Per thouo...d nf mid-year popalation; 1960, 1970, end 1979 dote.. CONSUMPTION Crude Death Mtse (rem thouseodi - A-nua ds-th, pet she....nd of mId-year Psene ,Cr lose th-asad popalation - Psa..n.. tars- eaPeas eater poulto ObS 197t, sad 1978 data,oas _atig less Thee eight per.e.n; excldes -belanea, hearse sad lreose Ierdatto eehtaenme fdahem oa ill Rt :1 bmrIn m.ilitary v-hinle.. her nernl repdrdnttor Period if she anPeti ..enrspeetseseii ai eeor orhuan ouair l ys feoiaat rd ttlity rtes.; _usualy fire-year" avrges ending In 1960, 1970, andii 197. bodat.e eaa pbf e husdo eplse;atae el faIl lnio-A Usrs.. rcatofmarid oem -A-eronrtge of marie cdiotR.ins- ahaiPed ho- licensing.tp~ o -~r.f.r4 alimrrie women insame.ag Pelot genral pnhlt pr thoen P-l.Papla;aerlada... s ofp mltionad 9ease F-ilY Pl.orioR -ri~~~~~~d -o -g g... Inunnerie and in...j yerswasraitet h InfT ea-ts io was i dn attet Indem of Pn rduto e Cpt hb9710 Idnden o pt cap titaanal tn o"diygneI ine Yetnesppe" defne anap ...ia pa praacto iatal fond c 15n 44oditiet . Praonio buled--ne med iand Eea adblcaiomde hed primar.ito eoriggnea es t aamhes ineeadat age) wirlareedile nd ontin ntrene (eg. offe ad-Cnem ptabli Pterdanh mrd PCa1ri-a -e tVs Base em . th .a.. o Pe -eia nelyo P-oCorie t (rero 10tof reqire ents)f Coputed...trot_ enrg quvletofd me_ edsplesaalbei cary .perta pia__l t OC PerdyCvial upiesot rsedmci c p196duatn net en tota Lbo forc d toasady Shn-omoa enriv perane inaedie eatd sea ditrbaia) o pophr udilaiod, nad ltoiag Iipenttte atea Agriculured(-tcnn I-r1 tmar fo .rte ttasing frey,haing anid- honnehali level; 1961-95, 1971, and 1977 dots, fishing ly ia patesgea p;rCltitallbrfrs;16,it ad1 aa Pe.r.crn ncyo rti em s daud)d- Pertain g isat off pe.spt .dtyietnt oe en nmnm, narmie aassem animal protein as an ri. avra e tr tief wrld,pair.omed hC -PARimted Thrdt 190 97,ad195dtadhs seaili...itaetitipattn ramaefl Chld(se iA)NetIPyiaelpe lhonod -Id.J- afesideth pe mbaad i te oa abrtra qu..Eiti.. ...d 1. ..d Pro.1pecet,olier20penem.peret20psnms,anNetes 4 p_Pn Li ntI...nya.Brh.yne)-Avng nm tofdyearnb of . lif taiti o boneo ds. -i,'ul:..i . : at birth; 1960, 1970 andf 19o78 data. ot o,".bl; 960 19; laf ty tfoteth lae: re t housand) d-ir Annual deei..gth1..s of t -roa nueroe ea IVRT Att al wateomupply 7(inclddna1treatsd-surf one.waters orruntreated but..mtugbamiosted1affordable. PerosaPtogs f heity of spr Per pouain.y In onp ra aeapblnlroreaie ee fama lve is ome-tied of~j overag pa aIt fonanorfsdosnlctdntmtrhn20mtr ts os a be- peruoml income2 o ther foontey. Urban levl _i dtived taf_thete considered a heogd Persdyt resNabet scue of ta oo.i ua res lne ihsjsestfrhge ataIlvn nahnaes family' seaterr . 6 70uds17de.. dipoa as 6ten n ol fttheir reeoti DA pou Ptiine. Osreti ie-tom lradS ieOts ivim Puml. may incad th coletion ran d byss,u ibS or itbo 1 treatment ty lomt omi Anlyi end Pr tjeatinna fDspatm 9a 0 t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ilbc16 offumaheneat aed gnt-wtr b mae-1dbornetnyetti ortthe ass of irde priviesa- sImilar 7 intal tions.L .....P -23 - ANNEX 1 page 4 of 5 COUNTRY DATA - MALAYSIA GROSS NATIONAL PRODUCT IN 1979: ANNUAL RATE OF GROWTH (% in constant prices and M$) US$ Mln x 1961-70 1970-76 1977 1978 1979 GNP at Market Prices 19,370 100.0 6.4 7.7 7.1 7.0 8.3 Gross Domestic Investment 5,082 26.2 6.7 9.4 19.7 9.5 10.5 Gross National Saving 6,173 31.9 . Exports of Goods, NFS 11,744 60.6 6.0 7.9 3.9 7.9 10.1 Imports of Goods, NFS 9,774 50.5 2.9 6.9 13.7 13.9 18.3 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1978 Output Employment Output Per Worker US$ Mln % Mln Z US$ X Agriculture 4,041 25.6 2.0 43.9 2,049 58.5 Industry 5,017 31.8 0.9 20.0 5,568 159.0 Services 6,701 42.5 1.6 36.1 4,188 119.6 Total/Average 15,759 100.0 4.5 100.0 3,502 100.0 GOVERNMENT FINANCE General Government M$ Mln % of GDP 1979 1979 1971-75 1976/78 Current Receipts 12,424 28.0 24.0 27.5 Current Expenditures 9,875 22.3 22.5 24.5 Public Authorities Surplus 369 0.8 0.8 1.1 Current Surplus 2,918 6.6 2.3 4.1 Development Expenditures 5,544 12.5 10.8 12.4 Foreign Borrowing (net) 754 1.7 2.3 1.8 MONEY, CREDIT AND PRICES 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 (Million M$ outstanding end period) Money and Quasi-Money 4,131 4,666 5,770 7,574 8,729 10,001 12,769 14,861 17,520 21,738 Bank Credit to Public Sector 833 1,045 1,186 1,375 1,746 2,148 3,036 3,583 3,379 3,873 Bank Credit to Private Sector 2,246 2,572 3,014 4,586 5,278 6,084 7,471 8,970 11,627 14.109 (Percentages or Index Numbers) Money and Quasi-Money as % of GDP 33.3 36.0 40.4 40.0 37.8 45.1 46.4 46.4 48.0 49.0 Consumer Price Index (1967 = 100) 101.3 102.9 106.2 117.4 137.8 144.0 147.7 154.8 162.4 168.3 Annual Percentage Changes in: Consumer Price Index 1.9 1.6 3.2 10.5 17.4 4.5 2.6 4.8 4.9 3.6 Bank Credit to Public Sector -8.4 25.5 13.5 15.9 27.0 14.6 41.3 18.0 -5.7 13.7 Bank Credit to Private Sector 21.9 14.6 17.2 52.2 15.1 15.3 22.8 20.1 29.6 21.3 . not applicable NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. - 24 - ANNEX I Page 5 of 5 TRADE PAYMENTS AND CAPITAL FLOWS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1976-79) (US$ Million) 1977 1978 1979 (US$ million) % Exports f.o.b. 6,038 7,295 10,857 Rubber 1,561 21.2 Imports f.o.b. 4,467 5,749 7,860 Timber 1,235 16.8 Nonfactor Services (net) -505 -651 -1,027 Petroleum 1,058 14.4 Resource Gap (deficit) 1,066 895 1,970 Tin 820 11.1 Factor Services (net) -517 -606 -880 Palm Oil 800 10.9 Net Transfers -32 -42 -53 All Other Commodities 1,880 25.6 Balance on Current Account 517 247 1,037 Total 7,360 100.0 Direct Foreign Investment 477 542 594 Net MLT Borrowing /a Disbursements 644 1,044 978 EXTERNAL DEBT, DECEMBER 31, 1978 Amortization 318 558 245 Subtotal 326 486 733 US$ Mln Other Items n.e.i. -644 -464 -1,121 Public Debt, incl. Guaranteed 3,004 Increase in Reserves (-) -199 -269 -1,244 Nonguaranteed Private Debt Total Outstanding & Disbursed 3,004 International Reserves 2,973 3,243 4,487 (end year) DEBT-SERVICE RATIO FOR 1979 Fuel and Related Materials % Imports 578 634 Exports 854 1,010 Public Debt, incl. Guaranteed 4.0 Of which: Crude Petro- Nonguaranteed Private Debt leum 770 969 Total Outstanding & Disbursed 4.0 RATE OF EXCHANGE IBRD/IDA LENDING (December 30, 1980) (US$ million) Average rate during period: IBRD M$ per US$ US$ per M$ Outstanding & Disbursed 489.46 1971 3.05 0.33 Undisbursed 516.84 1972 2.82 0.35 Outstanding incl. Undisbursed 1,006.30 1973 2.44 0.41 1974 2.41 0.41 1975 2.40 0.42 1976 2.54 0.39 1977 2.46 0.41 1978 2.32 0.43 1979 2.19 0.46 /a Medium and long-term capital flows are obtained from World Bank debt data and are not comparable with balance of payments estimates. not available - 25 - ANNEX II Page 1 of 14 pages THE STATUS OF BANK GROUP OPERATIONS IN MALAYSIA A. STATEMENT OF BANK LOANS (AS OF December 31, 1980) Amount in US$ million (Less cancellations) Loan No. Year Borrower Purpose Bank Undisbursed Twenty-one loans fully disbursed 399.47 810 1972 Malaysia Education (II) 15.50 0.73 880 1973 Malaysia Population 5.00 1.20 931 1973 Malaysia Highway (II) 19.50 3.28 967 1974 Malaysia Land Settlement 40.00 3.43 973 1974 Malaysia Agricultural Development 45.00 28.11 974 1974 Malaysia Education (III) 19.00 8.39 1044 1974 Malaysia Land Settlement 36.00 16.53 1115 1975 Malaysia Agricultural Research and Extension 20.50 11.78 1178 1975 National Electricity Board Power (VII) 35.00 7.40 1213 1976 Malaysia Sewerage 21.50 12.39 1214 1976 Malaysia Urban Transport (II) 26.00 13.12 1294 1976 Malaysia Rural Development 21.00 15.70 1329 1976 Malaysia Education (IV) 35.00 29.09 1376 1977 Malaysia Highway (III) 35.00 18.68 1443 1977 National Electricity Board Power (VIII) 22.00 12.61 1444 1977 Malaysia Irrigation 39.00 31.67 1493 1978 Malaysia National Extension 19.00 17.69 1522 1978 Malaysia Agricultural Development 26.00 24.62 1580 1978 Sabah Ports Authority Ports (II) 13.00 8.27 1590 1978 Malaysia Land Settlement 28.00 26.51 1608 1978 Malaysia Population (II) 17.00 16.20 1618 1978 Malaysia Coconut Smallholders Dev. 19.50 16.79 1632 1978 Malaysia Agricultural Development 26.50 22.19 1657 1979 Malaysia Education (V) 38.00 36.92 1717 1979 Malaysia Irrigation 31.00 28.56 1808 1980 National Electricity Board Power IX 50.00 50.00 1899 1980 Malaysia Agriculture Development /a 25.00 25.00 1900 1980 Malaysia Agriculture Credit /a 30.00 30.00 Total loans (less cancellations) 1,157.47 of which has been repaid 136.29 Total now outstanding 1,021.18 Amount sold 44.81 of which has been repaid 29.93 14.88 Total loans now held by Bank 1,006.30 Total undisbursed 516.84 /a Not effective as of December 31, 1980. - 26 - ANNEX II Page 2 of 14 pages B. STATEMENT OF IFC INVESTMENTS (AS OF December 31, 1980) Type of Amount in US$ million Year business Loan Equity Total 1964 Malaysian Industrial Development Development Finance Ltd. (MIDF) financing - 1.31 1.31 1966 Tasek Cement Ltd. Cement 1.28 0.28 1.56 1968 Malayawata Steel Ltd. Steel 2.45 1.01 3.46 1969 Malayawata Steel Ltd. Steel - 0.23 0.23 1970 India-Malaysia Textiles, Ltd. Textiles 1.25 0.25 1.50 1974 Malaysian Industrial Development Development Finance Ltd. (MIDF) financing - 0.63 0.63 Total gross commitment 4.98 3.71 8.69 Less: repayments, sales, cancellations, terminations and write-offs 4.09 3.46 7.55 Total commitments now held by IFC 0.89 0.25 1.14 Total undisbursed - _ _ - 27 ANNEX II Page 3 of 14 pages MALAYSIA C. PROJECTS IN EXECUTION /1 GENERAL AGRICULTURE LonTi No. 967 Johore Land Settlement Project; US$40.0 Million Loan of February 27, 1974; Effective Date: May 16, 1974; Closing Date: June 30, 1982 The project consists of clearing 81,000 acres of land and planting about 65,000 acres of oil palms, construction of 5 palm oil mills, 8 villages, roads, provision for power and water, and settle..ent of 6,500 families. Clearing of 82,800 acres has been completed and 72,500 acres of oil palms have been planted. Planting and maintenance standards are satisfactory. All schemes are now in production and production has recovered from initially disappointing levels. A major resupplying program to replace losses to game is underway and boundary trenches have been completed. Due to delays in infrastructure development, village development is one to three years behind schedule. About 4,080 settler houses have been constructed and 3,980 families settled. Rising timber prices and labor shortages are also creating difficulties for contractors. Regular coordination committee meetings have improved interagency relationships, but shortfalls in construction of water supply and access roads will cause some further slippage. About 1,130 miles of agricultural roads have been constructed. The Lok Heng mill is under construction and expected to be operative by mid-1981. Loan No. 1044 Keratong Land Settlement Project; US$36.0 Million Loan of October 3, 1974; Effective Date: January 9, 1975; Closing Date: June 30, 1983 The project consists of clearing about 63,000 acres of land and planting and maintenance of about 55,000 acres of oil palms; construction of three palm oil mills and establishment of two urban settlements for about 5,500 families. /1 These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any prob- lems which are being encountered and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 28 - ANNEX II Page 4 of 14 pages About 60,200 acres have been cleared and 52,500 acres planted to oil palm. On four schemes, 25% of palms were damaged by game. Perimeter trenches are being dug and seedlings resupplied. So far, 2,238 houses have been completed and 1,854 settlers moved in in schemes 1, 2, 4, and 5. The Bahau-Keratong highway has been opened for all traffic and the project area is no longer isolated. About 625 miles of agricultural works have been constructed. The second mnill is under construction and expected to be operative by spring 1981. Loan No. 1115 Agricultural Research and Extension Project; US$20.5 Million Loan of May 30, 1975; Effective Date: October 21, 1975; Closing Date: June 30, 1984 The project is designed to expand and strengthen research programs and establish 'an Extension Liaison Unit in the Department of Agriculture. The project was restructured in July/August 1979 to cover all agricultural research programs of the Institute, substantially reduce the man-years of consultants, reduce the loan from $28.5 million to $20.5 million, and extend the Closing Date to June 1984. Progress since restructuring has generally been satisfactory except for the hiring of consultants. Loan No. 1493 National Extension Project; US$19.0 Million Loan of January 10, 1978; Effective Date: September 8, 1978; Closing Date: December 31, 1983 This project is designed to strengthen agriculture extension and related services on a national basis in Malaysia. An uncertain federal/state relationship continues to constrain implementation. Specifically, the main constraints are (a) employment of project staff as temporary employees due to the federal system, and (b) the inability of the Public Works Department to prepare timely civil works designs. However, the interest and enthusiasm in the T&V extension methodology has spread but some of the states are suffering from inadequate staffing to provide effective supervision and guidance and separate extension and regulatory functions at the field level and from lack of fully understanding the concept of impact points. Sabah and Sarawak have not yet accepted federal control of staff; physical implementation is proceeding satisfactorily in Sarawak. Loan No. 1590 FELDA VI Land Settlement Project; US$28.0 Million Loan of August 11, 1978; Effective Date: March 9, 1979; Closing Date: June 30, 1985 The project consists of land clearing, planting and maintenance of 62,000 acres of rubber, up to 10,000 acres of cocoa and 500 acres of experimental plantings of other crops in the states of Pahang and Negri Sembilan, recruitment and settlement of 6,200 rubber smallholders and 1,500 - 29 -AN t Page 5 of 14 pages hired laborers, and construction of necessary housing and infrastrulcture facilities. About 29,000 acres have been cleared and 23,000 acres planted to rubber. Clearing and planting operations are seriously delayed in Pahang State due to delayed forest clearances by the State. FELDA is reviewing alternative development proposals to offset slow development in Pahang, one possibililty being the expansion of the project areas in Negri Sembilan. Planting and maintenance standards are satisfactory. The cocoa planting program has been tentatively postponed till 1983 pending further soil and climatological studies. A start has been made (100 acres) with the crop diversification experimental program. Some fruit and annual food crops will be grown on areas of 5 to 50 acres each. Loan No. 1618 Coconut Smallholders Development Project; US$19.5 Million Loan of October 24, 1978; Effective Date: February 23, 1979; Closing Date: March 31, 1984 The project consists of rehabilitation of about 40,500 acres of traditional MT Coconuts and intercropping with cocoa, coffee, fruits, etc.; re/new planting of about 17,000 acres with hybrid coconuts and assocLated cash crop gardens in the initial years; the provision for the importation of about 6,600 crossbred dairy animals for the development of about 3,350 integrated dairy and beef operations; and the strengthening of support services for crop and dairy production. The overall crop component is ahead of schedule with uneven performance. About 3,800 farm families have received assistance to rehabilitate 13,000 acres and replant 2,650 acres in 1979. The dairy/beef component is about one year behind schedule due to delay occured in importing crossbred heifers. However, the scheduled delivery of 6,600 imported crossbred heifers from early 1981 through mid-1982 should help the livestock component to catch up to the implementation schedule. Additional staff recruitment and training programs are also behind schedule but substantial progress is now being made. Loan No. 1899 Kelantan Land Schemes Rehabilitation Project; US$25.0 Million Loan of December 1, 1980; Not Yet Effective; Closing Date: June 30, 1987 Assistance will be provided to 5,700 settlers on TAKDIR land settle- ment schemes to complete development of their holdings and to replant or rehabilitate existing crops. One thousand eight hundred (1,800) households will be settled to develop landholdings on the schemes. Basic infriastructure will be completed on the schemes and TAKDIR will be strengthened. - 30 - ANNEX II Page 6 of 14 pages Loan No. 1900 Rural Credit Project; US$30.0 Million Loan of December 1, 1980; Not Yet Effective; Closing Date: June 30, 1984 The project is designed to support the expansion of BPM s portfolio of agricultural production credits, and term loans for rural development and increased agricultural production. IRRIGATION AND RURAL DEVELOPMENT Loan No. 973 Western Jobore Agricultural Development Project; US$45.0 Million Loan of April 5, 1974; Effective Date: August 14, 1974; Closing Date: June 30, 1983 The project includes main and feeder drains, farm roads, coastal embankments and tidal gates to improve drainage and access in the tree crop area of about 135,000 ha in southwest Peninsular Malaysia, as well as an integrated agricultural development program to introduce intercropping and other changes in cropping patterns, construction of farmers development centers, and improvements in research and extension. Civil works got off to a slow start and are about 3 years behind schedule, but progress is now accelerating. Staffing and land acquisition problems have been largely overcome. Work is progressing on drainage and farm road contracts. Construc- tion of the Macap Dam began in October 1979 and should be completed in October 1981. Bids have been invited for Bekok and Sembrong dams. Progress on the agricultural side is generally satisfactory, particularly in developing an integrated agricultural service system to coordinate the efforts of the crop-based development agencies with the extension activities in the project area. Work is also proceeding on the preparation of a second phase project. Loan No. 1294 North Kelantan Rural Development Project; US$21.0 Million Loan of July 21, 1976; Effective Date: October 28, 1976; Closing Date: December 31, 1981 The project includes drainage and flood protection for 30,000 ha and intensive irrigation for 12,000 ha of padi land; construction of 190 km of rural roads; 15 small irrigation schemes serving 1,300 ha; construction, rehabilitation and equipment of 25 farmers development centers; and establishment of agricultural extension services. Implementation of civil works has fallen about four years behind schedule, due mainly to staffing shortages, particularly at DID headquarters for design and tendering, delays in land acquisition, the need for studies to define the final alignments of flood protection bunds and longer construction periods necessitated by lack of adequate construction capability. Progress of establishment of agricul- tural support services is generally satisfactory. Project completion is expected by December 1984. - 31 - ANNEX II Page 7 of 14 pages Loan No. 1444 National Small-Scale Irrigation Project; US$39.0 Million Loan of August 3, 1977; Effective Date: October 25, 1977; Closing Date: March 31, 1983 This project includes construction of small irrigation systems with a total irrigable area of about 54,000 ha distributed throughout Malaysia; technical assistance and training for DID; procurement of equipment and a feasibility study for the Rompin-Endau irrigation project. Construction is proceeding satisfactorily and most schemes should be completed on schedule by the end of 1982, although some work may extend into mid-1983. Of the 195 proposed schemes to be implemented under the project, 67 schemes have been rejected/deleted by the Preparation and Evaluation Team and 18 new schemes have been added; the revised number of schemes proposed under the project is now 146. Of these, 111 have been approved by the Bank for inclu- sion in the project following appraisal by the Preparation and Evaluation Team. Construction of 22 schemes had been completed and 64 schemes were under construction as of June 30, 1980. The final draft of the feasi- bility report for the Rompin-Endau Project was submitted by the consultants to the Government in December 1979. Loan No. 1522 Northwest Selangor Integrated Agricultural Development Project; US$26.0 Million Loan of March 8, 1978; Effective Date: June 21, 1978; Closing Date: December 31, 1983 The project includes intensification of irrigation network for 20,000 ha of padi; drainage work for 77,000 ha of tree crops; and facilities, equipment, and training to support an intensified program of agricultural services for the Northwest Selangor region-s smallholders. The project started out about one year behind schedule due primarily to staff shortages, but no significant progress has been made on staffing, design anid tendering of structural tertiaries, and planning, survey and design of drainage works. Progress on the agricultural component is satisfactory. A drafl: agricultural services operation manual has been prepared. The project is expected to be completed by end-1983, about one year behind appraisal schedule. Loan No. 1632 Krian-Sungei Manik Integrated Agricultural Development Project US$26.5 Million Loan of December 13, 1978; Effective Date: March 6, 1979; Closing Date: December 31, 1984 The project will provide improved drainage and irrigation facili- ties, access roads, training and intensifed agricultural supporting services in two separate areas, covering a total of about 30,000 ha of padi land in the state of Perak. Due to initial staff shortages and continuing delays in land acquisition, project completion is now expected by the end of 1985, two years behind the appraisal estimate. - 32 - ANNEX II Page 8 of 14 pages Loan No. 1717 Muda II Irrigation Project; US$31.0 Million Loan of July 30, 1979; Effective Date: September 4, 1979; Closing Date: December 31, 1984 The project is the first phase of tertiary irrigation and drainage development in the Muda irrigation area, whose storage facilities and main canal system were constructed under a previous Bank-financed project (Loan 434-MA) during the period 1965-70. The project will provide tertiary irrigation canals, drainage channels, and farm roads to serve nearly 25,000 ha of padi land, representing about 25% of the total command area. It also includes establishment of a highly organized extension system, improvement of operation and maintenance facilities, drainage and coastal protection works serving the entire 98,000 ha area. Project completion is now expected end- 1985 as compared to end-1983 at appraisal. EDUCATION Loan No. 810 Second Education Project; US$15.5 Million Loan of April 5, 1972; Effective Date: July 7, 1972; Closing Date: December 31, 1980 The project provides for: (a) educational television in Peninsular Malaysia; (b) a national curriculum development center; (c) a science university; and (d) technical and vocational secondary schools. Physically the project has been completed and disbursement is practically complete. The Closing Date will not be extended. Loan No. 974 Third Education Project; US$19.0 Million Loan of April 5, 1974; Effective Date: June 26, 1974; Closing Date: December 31, 1982 The Project includes eight general secondary schools, four teacher training colleges and one polytechnic institute in Peninsular Malaysia and education mass media in Sabah/Sarawak. Project implementation is about three years behind schedule because of site selection problems, slow design and tendering, poor performance by contractors and shortages of building materials and labor. The implementation staff has been expanded and strengthened and construction is in progress at all project locations. Disbursements are improving. Loan No. 1329 Fourth Education Project; US$35.0 Million Loan of November 18, 1976; Effective Date: January 14, 1977; Closing Date: June 30, 1982 The project provides for: (a) improved planning and construction of approximately 850 primary schools in seven most disadvantaged states of Malaysia; (b) establishment of four educational resource centers and one - 33 - ANNEX II Page 9 of 14 pages teacher training college; (c) expansion of two and establishment of three industrial training institutes; and (d) further study of community education needs. The pace of primary school construction program (75% of project total) is satisfactory. Over 50% of the primary schools have been completed; the remaining project items are under construction. Loan No. 1657 Fifth Education Project; US$38.0 Million Loan of March 14, 1979; Effective Date: May 7, 1979; Closing Date: June 30, 1985 The project provides for: (a) construction and equipment for 76 lower secondary schools to be located in areas of poor access to education; (b) establishment of administrative training institutes for headmasters and other educational officers; (c) a new central campus and three regional centers to expand the capacity and improve the program of the national public administration academy; and (d) assistance to long-range planning of occupa- tional training. Implementation performance is good, and overall the project is on, or slightly ahead of, schedule. ENERGY Loan No. 1178 Seventh Power Project; US$35.0 Million Loan of December 17, 1975; Effective Date: March 10, 1976; Closing Date: June 30, 1981 Extension of Prai Power Station under the Seventh Power Project is proceeding satisfactorily, about 98% complete at the end of September 1980. Units No. 4 and 5 were taken over by NEB in December 1979 and June 1980, respectively. Unit No. 6 was commissioned in October 1980. Loan No. 1443 Eighth Power Project; US$22.0 Million Loan of August 3, 1977; Effective Date: January 9, 1978; Closing D)ate: June 30, 1982 Progress on the Pasir Gudang Thermal Power Station under the Eighth Power Project was about 50% complete at the end of September 1980, about 3 months behind the revised schedule due to bad weather in the early part of 1980 and the shortage of skilled labor. Loan No. 1808 Ninth Power Project; US$50.0 Million Loan of May 21, 1980; Effective Date: November 6, 1980; Closing Date: August 31, 1985 The project, estimated to cost $232.9 million, will be cofinanced by Commonwealth Development Corporation (UK), Canadian International Development Agency, Overseas Economic Cooperation Fund (Japan) and commercial banks. It - 34 - ANNEX II Page 10 of 14 pages includes construction of two dams and hydroelectric power stations (192 MW) and about 174 km of transmission lines and associated substations. Site preparatory works have commenced. Contracts for major electrical and mechanical works have been awarded. Loan 1213-MA Kuala Lumpur Sewerage Project; US$21.5 Million Loan of March 11, 1976; Effective Date: August 25, 1976; Closing Date: December 31, 1981 The project is the first stage (1976-81) of a 30-year master plan for sewerage development in the Kuala Lumpur metropolitan area. It includes the extension of sewage collection (about 70 miles of trunk and lateral sewers) and treatment facilities to serve an additional population of 200,000 in the Kuala Lumpur Federal Territory; the institution of a separate Sewerage Department within the Kuala Lumpur City Hall with its own accounting system and finances; engineering and management consultant services; staff training; and the preparation of sewerage and pollution control system in the Kuala Lumpur metropolitan area. The engineering of the project has been satisfac- torily completed. Construction of the three major contracts is progressing. Land acquisition and resettlement of present occupants have created serious problems but these are now being solved. Sewerage surcharges on water bills were instituted after delays. Compliance with covenants regarding long-term sewerage and urban planning in Selangor State is lagging. The project is expected to be completed by mid-1982, about two years behind the original schedule, at about the estimated cost. TRANSPORTATION Loan No. 931 Second Highway Project; US$19.5 Million Loan of August 22, 1973; Effective Date: October 25, 1973; Closing Date: December 31, 1981 The project includes: (a) construction and improvement of two sections of Federal Route I totalling about 90 miles in length; and (b) consultant services for (i) feasibility studies and detailed engineering of about 22 miles of Route I and connecting roads in the vicinity of Kuala Lumpur, (ii) detailed engineering of about 200 miles of roads in West and East Malaysia, (iii) town development studies for Kuantan and for the region of North-East Negri Sembilan and an urban road improvement study for Kuala Lumpur, and (iv) supervision of (a) above. The project, several months after its original completion date, was about 95% complete. All studies and detailed engineering were completed. The new Kuala Lumpur-Seremban Expressway was open to traffic for about 80% of its - 35 - ANNEX II Page 11 of 14 pages length by the end of 1977, and except for a one-mile section at the northern end, the balance of the Expressway and its access ramps were opened to traffic by the beginning of June 1979. The northern extremity, while completed, will be open to traffic in about June 1981, after the completion of the interchange and access ramps which form part of the Kuala Lumpur Traffic Dispersal Scheme (Loan No. 1214). The Expressway is operating fairly well under traffic and Government is taking steps to remove traffic hazards which had been created by unauthorized use of road and shoulders for commercial activities. The Kuala Lumpur-Seremban Road improvement works have been completed and the entire length of the road is open to traffic. Difficulties with land acquisition have been largely responsible for long delays in the completion of the widening and improvement works for the Kuala Lumpur-Batang Kali Road, construction of which began in November 1976; it is now 90% completed. Construction costs have escalated sharply due to the delays in project execution combined with rapid inflation and the total project cost is now estimated at US$53 million compared to an appraisal estimate of US$37 million, an increase of 43%. Loan No. 1376 Third Highway Project; US$35.0 Million Loan of April 4, 1977, Effective Date: May 4, 1977; Closing Date: June 30, 1982 The project consists of: (a) reconstruction and improvement of trunk roads in Sabah; (b) four-year maintenance program for Sabah, including procurement of equipment, upgrading 290 miles of 13 road sections and consultants services for supervision of construction and technical assistance to Sabah's PWD; (c) development of pilot road maintenance and pavement strengthening programs for the states of Johore, Perak and Kelantan in Peninsular Malaysia, including pavement strengthening of about 120 mi in Johore; and (d) a transport/railway study for Peninsular Malaysia and an urban study of Kota Kinabalu. The project overall is about 80% completed. Construction work on the east and west coast roads in Sabah (three contracts) started in September 1977, about five months behind schedule. The west coast road is completed. Of the two contracts comprising the east coast road, one has recently been rescinded and was assigned to the other contractor who was the second lowest bidder. The Highway Maintenance and Road Upgrading Program in Sabah is now proceeding satisfactorily with the help of consultants but the program is more than a year behind schedule. Progress is now satisfactory on the Pavement Strengthening Program in the three pilot states in Peninsular Malaysia, but the reorganization and upgrading of the State Maintenance Sections and of the Maintenance Unit within the Federal Public Works Department is behind schedule, primarily due to staff shortages. The urban study of Kota Kinabalu in Sabah and the transport/railway study in Peninsular Malaysia have been completed. Procurement of the first and second tranches of maintenance equipment for the Sabah Highway Maintenance Program has been completed. Proposals for procurement of additional equipment and some technical assistance, which would represent the balance of the loan, is under preparation. -36 - ANNEX II Page 12 of 14 pages Loan No. 1580 Second Sabah Ports Project; US$13.0 Million Loan of September 20, 1978; Effective Date: November 10, 1978; Closing Date: September 30, 1982 The project aims at: (a) providing Tawau Port with the capacity to meet forecasted traffic; (b) providing the ports of Kota Kinabalu, Sandakan and Tawau with cargo handling equipment to meet future traffic growth and to replace worn-out items; and (c) improving the performance of the Sabah Ports Authority by providing technical assistance and staff training. Civil works commenced in December 1979 and are about 35% complete. Traffic and financial results for 1980 were generally better than forecasted. Management consultants completed field work in July 1980 and a draft final report in December 1980, which is now being reviewed by the Sabah Ports Authority. POPULATION Loan No. 880 First Population Project; US$5.0 Million Loan of February 9, 1973; Effective Date: June 21, 1973; Closing Date: December 31, 1981 The objective of the project is to: (a) strengthen administration of the family planning program; (b) extend family planning services to rural areas; (c) expedite in-service training of medical and paramedical personnel in family planning; (d) introduce population education in schools; (e) improve family planning, nutrition and health education programs for the rural population; (f) broaden research and evaluation through establishment of population research centers. The National Family Planning Board (NFPB), by activating the national and state level committees and subcommittees, has recently gained greater managerial control over project implementation. With the creation of the Project Construction Coordination Unit (PCCU), the Government has succeeded in halting the slow progress in the civil works. To date, 453 buildings out of a total of 571 have been completed and a further 95 are under construction. According to the revised schedule, construction of some facilities will be completed only by mid-1981. Due to this delay, the closing date has been extended to December 31, 1981. Annual contraceptive acceptors rose from about 75,000 in 1976 to over 87,000 in 1979; nearly 40% of these acceptors were reported to have been recruited through the integrated rural health facilities supported through the project. The percentage of women in childbearing age using contraception increased from 16% in 1970 to over 39% in 1978. The estimated rate of current users of contraceptives is about 45% of the women in reproductive age. -37 - ANNEX II Page 13 of 14 pages Loan No. 1608 Second Population and Family Health Project; US$17.0 Million Loan of July 17, 1978; Effective Date: December 15, 1978; Closing Date; December 31, 1983 The project is designed to strengthen further the national family planning program in order to achieve the demographic goal of reducing the birth rate from 30.3 per 1,000 in 1975 to 26 in 1985, with a corresponding reduction in the population growth rate from 2.4% to 2% in Peninsular Malaysia, and to extend family planning services to Sabah and Sarawak for the improvement of maternal and child health. Due to recent changes in several key management positions in the Ministry of Health and National Family Planning Board and those agencies' preoccupation with the preparation of the Fourth Malaysia Plan, progress of project implementation has slowed down. Procurement of equipment and vehicles is proceeding on schedule. National program performance, in terms of the number of new acceptors, reached an all time high of over 87,000 during 1979 compared to about 85,000 in 1978. Project components related to health in Sarawak and those under the Ministry of Agriculture in the whole of Malaysia are progressing well. Of the 200 buildings under the project, sites for 150 have been acquired, of which 22 are either under construction or have been tendered. The Government has taken action to locate and acquire sites for the remaining 50 buildings. NFPB will review NFSC building plans in terms of its special functional requirements and seek Bank's comments prior to its final- ization. Considerable progress has been made in establishing specialized services, training, and research under the National Family Planning Center. URBAN Loan No. 1214 Second Kuala Lumpur Urban Transport Project; US$26.0 Million Loan of March 11, 1976; Effective Date: November 11, 1976; Closing Date: June 30, 1981 The main objective of the project is to increase the efficiency of the transport system in Kuala Lumpur. Public transport services will be improved while the use of private cars will be restrained. Al-though primarily concerned with urban transport, the project also introduces new approaches to residential development for low-income families. The main components are: (a) road and intersection improvements, traffic engineering and control schemes and construction of new radial roads; (b) transport policy measures including introduction of minibus services, traffic priorities for high- occupancy vehicles and area road pricing; (c) provision of new serviced plots for households and businesses, and improvement of infrastructure services for - 38 - ANNEX II Page 14 of 14 pages existing households; and (d) technical assistance to support traffic manage- ment and transport planning, to prepare an urban development project for Kuantan, and to review national housing policies and programs. The major problem in project implementation has been the Government's unwillingness to pursue the transport policy measures. Bus and minibus services have not been expanded significantly, only one priority lane for buses has been introduced and area road pricing has been delayed indefinitely. After initial delays, new road construction, road and intersection improvements and traffic signal procurement and installation have generally proceeded satisfactorily, although problems are being experienced with one contract for major roadworks. Execution of the residential components has been unsatisfactory due to administrative problems and the Government-s lack of commitment to the policies on which the components are based. ANNEX III Page 1 MALAYSIA ROMPIN-ENDAU AREA DEVELOPMENT PROJECT Supplementary Project Data Sheet Section I: Timetable of Key Events (a) Time taken to prepare the project: 4 years (b) Date of departure of appraisal mission: March 24, 1980 (c) Date of completion of negotiations: January 29, 1981 (d) Planned date of effectiveness: July 31, 1981 Section II: Special Bank Implementation Actions None. Section III: Special Conditions A. Condition of Effectiveness A suitably qualified and experienced Project Manager would be appointed (para. 39). B. Other Special Conditions (i) the implementing agencies would maintain separate accounts for the project; these would be collated by the Project Manager. The Government would furnish the Bank such information regarding these accounts as the Bank might reasonably request (para. 38); (ii) the Government would ensure that adequate funds are allocated to LPN and FOA to provide drying and storage, and rice mill- ing and marketing facilities in the project area as needed (para. 43); (iii) DOA would prepare an agricultural services operations manual as a guide for field staff by January 1, 1984 (para. 43); and DID would prepare a designer's operations manual on completion of final design of each subproject (para. 44); - 40 - ANNEX III Page 2 (iv) an independent expert or panel of experts, acceptable to the Bank, would be employed by the Government to review the consultant-s design of the Anak Endau dam and the Pontian weir and associated structures before start of construction, and to examine during construction whether any changes in the designs are needed (para. 45); (v) the Government would establish a suitable maintenance and inspection program for the Anak Endau dam and the Pontian weir and would propose to the Bank appropriate implementation arrangements for the Bank's review no later than one year before the expected completion of the dam and the weir (para. 45); (vi) the Government would take all measures necessary to ensure that the design, construction and operation of works under the project are carried out in accordance with appropriate ecological and environmental standards (para. 46); (vii) the Government would forward to the Bank, for its review and comment by June 30, 1981, settler selection criteria and the Government-settler agreement (para. 47); and (viii) the Government would take all necessary measures to ensure that no farms in the project area would be fragmented or fall into the hands of absentee landlords (para. 47). 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